Board of Control for Cricket in India v Kochi Cricket Pvt Ltd (2018)

Before the 2015 Amendment Act, merely filing a s. 34 petition to set aside an award operated as an automatic stay of the award: the winner could not enforce it until the challenge was decided, which could take years. The Amendment Act substituted s. 36 so that filing a s. 34 petition "shall not by itself render that award unenforceable" unless the court grants a stay on a separate application.

The amendment came into force on 23 October 2015. Thousands of awards were then under challenge. Which s. 36 applied to them? And more broadly, to which proceedings does the Amendment Act apply at all? Section 26 of the Amendment Act answers that, and this case is the Supreme Court's reading of it.

Eight batches of appeals were heard together. In the lead matter, Kochi Cricket invoked arbitration against the BCCI by a notice dated 18 January 2012 under a franchise agreement of 12 March 2011. A sole arbitrator made two awards on 22 June 2015 against the BCCI.

On 16 September 2015 — before the Amendment Act came into force — the BCCI filed s. 34 petitions in the Bombay High Court. On 26 November 2015, after it came into force, the respondents filed execution applications. The BCCI resisted by chamber summons, contending that the old s. 36 applied, so that there was an automatic stay of the awards until the s. 34 proceedings were decided. A single judge dismissed the chamber summons and held the amended s. 36 applied.

In three other appeals too, the s. 34 applications were filed before 23 October 2015; in the remaining four, after it.

1. How is s. 26 of the Amendment Act to be read: does the Amendment Act apply to court proceedings (such as s. 34 petitions) arising out of arbitrations that commenced before 23 October 2015?
2. Does the substituted s. 36 apply to s. 34 petitions filed before 23 October 2015?

The appeals were dismissed. The amended s. 36 applied, including to s. 34 petitions pending when the Amendment Act came into force.

Section 26 has two distinct parts

The Court agreed with counsel that s. 26 "is indeed in two parts. The first part refers to the Amendment Act not applying to certain proceedings, whereas the second part affirmatively applies the Amendment Act to certain proceedings." The word "but" separates them.

The first part speaks of "the arbitral proceedings" commenced under s. 21, and uses the word "to". These are proceedings before the arbitral tribunal (Chapter V of the 1996 Act). Because the conduct of arbitral proceedings is largely procedural, parties may "otherwise agree" and apply the Amendment Act to arbitrations begun earlier.

The second part uses "in relation to" and makes no reference to s. 21: "Whereas the first part refers only to arbitral proceedings before an arbitral tribunal, the second part refers to Court proceedings “in relation to” arbitral proceedings, and it is the commencement of these Court proceedings that is referred to in the second part of Section 26".

So "Section 26, therefore, bifurcates proceedings, as has been stated above, with a great degree of clarity, into two sets of proceedings – arbitral proceedings themselves, and Court proceedings in relation thereto." The conclusion: "The scheme of Section 26 is thus clear: that the Amendment Act is prospective in nature, and will apply to those arbitral proceedings that are commenced, as understood by Section 21 of the principal Act, on or after the Amendment Act, and to Court proceedings which have commenced on or after the Amendment Act came into force."

The appellants' reading — that the date of commencement of the arbitration under s. 21 governs everything, including all later court proceedings — "would not only do violence to the plain language of Section 26", and "This is not the scheme of Section 26 at all". Section 6 of the General Clauses Act did not help them either, because "Section 26 being a special provision having to be applied on its own terms" shows a contrary intention.

Section 36 applies to s. 34 petitions filed before the amendment

That left the four appeals in which s. 34 petitions were filed before 23 October 2015. Here the question was whether s. 36 created a vested right, or was procedural.

The Court held that s. 36 is about execution. Under the 1996 Act the award is not converted into a decree by a judgment; "Under Section 36 of the 1996 Act, the award is deemed to be a decree and shall be enforced under the Code of Civil Procedure as such." A decree is enforced only through execution, and so s. 36 is "a provision dealing with the execution of arbitral awards."

The old s. 36 gave the losing party no substantive right: "Section 36, prior to the Amendment Act, is only a clog on the right of the decree holder, who cannot execute the award in his favour, unless the conditions of this section are met. This does not mean that there is a corresponding right in the judgment debtor to stay the execution of such an award."

Being procedural, the words "has been" in the new s. 36(2) point to petitions already filed. And given the unfairness of the old automatic stay, "it is clear that Section 36 as amended should apply to Section 34 applications filed before the commencement of the Amendment Act also for the aforesaid reasons." The Court noted that in 2004 its judgment in National Aluminium Company had recommended that s. 36 be substituted, "as it defeats the very objective of the alternative dispute resolution system".

On the anomalies argued

The appellants argued that the Court's reading produced anomalies. The Court answered: "Cut off dates, by their very nature, are bound to lead to certain anomalies, but that does not mean that the process of interpretation must be so twisted as to negate both the plain language as well as the object of the amending statute."

The proposed s. 87

After arguments closed, the Additional Solicitor General placed on record a Government press release of 7 March 2018 about a proposed new s. 87, based on the Justice B.N. Srikrishna High Level Committee's recommendation, under which the Amendment Act would not apply to court proceedings arising out of arbitrations commenced before 23 October 2015. The Court refused to use it to interpret s. 26: a proposed Bill "can hardly be the basis for interpretation of a provision of law as it now stands." It warned that the proposed s. 87 would "put all the important amendments made by the Amendment Act on a back-burner", and directed that a copy of the judgment be sent to the Ministry of Law and Justice and the Attorney General.

The Enercon appeals

In the connected appeals involving the Mehras and Enercon, a further point on who could execute the award was raised at the end of argument. The Court found the High Court "may not be strictly correct in its appreciation of the law" but had done justice on the facts, and declined to interfere.

Section 26 of the Arbitration and Conciliation (Amendment) Act 2015 separates arbitral proceedings from court proceedings in relation to them. The Amendment Act applies to arbitral proceedings commenced under s. 21 on or after 23 October 2015 (and to earlier ones if the parties agree), and to court proceedings commenced on or after that date, regardless of when the arbitration began. The substituted s. 36, being a procedural provision on execution that takes away no vested right, applies even to s. 34 petitions pending on that date; filing a s. 34 petition does not by itself stay an award.

• Direct question: Does the filing of an application under s. 34 operate as an automatic stay of an arbitral award? Discuss with reference to the 2015 amendment. Explain the old and new s. 36, then BCCI v Kochi Cricket on its application to pending petitions.
• Question on transition: Explain the scope of s. 26 of the Arbitration and Conciliation (Amendment) Act 2015. Give the two-part reading: "to" the arbitral proceedings (s. 21 date) versus "in relation to" — court proceedings, judged by their own commencement date.
• Problem question: arbitration invoked in 2012, award in June 2015, s. 34 petition in September 2015, execution sought in November 2015. Apply the case: the amended s. 36 governs; the award may be executed unless the court grants a stay on a separate application.
• Sub-point worth marks: why s. 36 is procedural — it concerns execution of an award deemed to be a decree, and the old rule was "only a clog" on the award-holder, not a right in the award-debtor.